USD recovers as inflation falls as forecast

Summary:

• USD recovers as CPI matches forecasts

• Pound looks through mixed UK data; Brexit sensitivity clear

• US stocks remain near recent highs but Europe pulls back

• Stock of the week: Bristol-Myers Squibb

• Japan’s FSA gauges interest in crypto ETFs

The greenback is attempting to stage a comeback this afternoon after a fairly soft week for the US dollar, which has seen the currency fall against most of its peers.  The timing of the move does coincide with the beginning of the US session and it is readily apparent that US traders have clearly entered buying. Before the US entered we got the latest inflation figures, with the CPI for December coming in at +1.9% as expected. This marked a drop on the 2.2% Y/Y seen previously, and is in fact the lowest since July 2017. A large part of this drop can be explained by the recent plunge in oil prices and if we strip out energy (and food) to arrive at a core reading, the print is higher at 2.2% Y/Y.

On the whole it’s been a pretty quiet week for the pound, with the markets trading in a narrow range ahead of next week’s key Brexit vote which was especially evident in the muted reaction we saw to those poor GDP and manufacturing figures this morning. Having said that, there was a little flurry of activity just before 11AM however, with the pound rallying sharply after a story in the Evening Standard claimed that PM May is looking to extend the Brexit deadline beyond March. The GBP/USD spiked higher by around 90 pips in less than 5 minutes as this news hit the wires and when you consider that the entire weekly range for the market beforehand was the same at 90 pips - it is clear how sensitive traders are at present to any Brexit headlines.

The UK100 had earlier moved up to a 5-week high but it has since fallen back, with the pound edging higher and capping the gains. The DE30 is also on track for a red day but it has been a good week on the whole. As has been the case of late the US is outperforming Europe and the US500 trades around 2590 and not far from it’s weekly high on the European close. The market is in the lower reaches of a possible resistance zone that runs up to 2624 and this could well be worth keeping a close eye on next week.

Our stock of the week is Bristol-Myers Squibb and an in-depth look at the company can be found here.

Cryptocurrency once again headed lower yesterday Bitcoin pulling back beneath the $4000 mark. The declines were broad based and most of the major coins suffered significant losses. The capitalization of the whole market moved back below $125 billion mark. However, despite moods on the cryptocurrency market being sour at the moment some upbeat news concerning virtual currencies surfaced in Japan recently. Financial Services Agency (FSA), the Japanese financial watchdog, is said to have made an unexpected U-turn when it comes to cryptocurrencies. In that second half of 2018 there was a vivid discussion on whether FSA should revamp the Japanese securities law or not. Revision would allow debut of cryptocurrency derivatives, like futures or options, on the Japanese exchanges. However, FSA suddenly dropped efforts to change the law last month and it looked like virtual assets would not make its way into Japan’s financial mainstream anytime soon. According to the Bloomberg report, FSA is now trying to gauge investors’ interest in another innovative financial instrument based on cryptocurrencies - crypto ETF.